Present Value Calculator
What a Future Dollar Is Worth Today
A dollar promised ten years from now is worth less than a dollar in hand today, and not just because of inflation — it's worth less because a dollar today can be invested and grow. Present value calculates exactly how much less, discounting a known future amount back to today's terms at a given rate of return, which is the same discounting logic behind bond pricing, lottery lump-sum offers, and structured settlement valuations.
The Formula
FV is the future value, r is the periodic discount rate (annual rate divided by the number of compounding periods per year), and n is the total number of compounding periods.
Where This Matters
- Lottery and settlement payouts — comparing a lump-sum offer to a series of future payments requires discounting those future payments back to today's dollars at a fair rate.
- Valuing a future obligation — knowing today's cost of meeting a fixed future liability, such as a balloon payment or a college tuition bill, starts with a present value calculation.
- Comparing investment offers — two offers promising different future payouts at different dates can only be compared fairly once both are discounted to the same point in time.
Worked Example
A $50,000 payment due in 10 years, discounted at a 6% annual rate:
| Compounding | Present value |
|---|---|
| Annually | $27,919.74 |
| Monthly | $27,481.64 |
More frequent compounding lowers present value slightly, since the effective discount rate rises as compounding periods increase.
How to Use This Calculator
- Enter the future value you're discounting back to today.
- Enter the annual discount rate.
- Enter the number of years until the future value is received.
- Select the compounding frequency — annually, semiannually, quarterly, monthly, or daily.
- Select Calculate to get the present value.
Related Calculations
Run the reverse projection with the Future Value Calculator, or apply the same discounting logic across multiple cash flows with the Net Present Value (NPV) Calculator.